The widespread use of digital currencies in Portugal has been driven by the comfortable environment created by the government. Crypto traders benefit from working with this type of asset, as the government has abolished income tax on individuals. For legal entities, it will be interesting to open a representative office in Madeira, an autonomous region of this country with a pleasant tax system.

In 2021, the Central Bank of Portugal (Banco de Portugal) officially outlined the conditions and parameters required for organizations operating with virtual assets.

The legislative regulation was based on the Directive (EU) of the European Parliament and of the Council 2018/843 of May 30, 2018 (5AMLD) , followed by the adoption of Law No. 58/2020 on August 31, 2020, and the amendment of Law No. 83/2017 of August 18, 2017 (“Anti-Money Laundering and Countering the Financing of Terrorism Law” (AML / CFT Law)).

According to these regulations, the activities of legal entities related to virtual assets are subject to registration, obtaining a crypto license in Portugal, and control by the Central Bank.
The license is required for:

  • exchanging crypto-assets for fiat currencies and vice versa, as well as crypto for crypto – VASP (Virtual Asset Service Provider)
  • ICO, ITO, DeFi projects
  • Custody services – storage of crypto-assets, encrypted keys.

If crypto-assets have the characteristics of securities, they are subject to the rules of financial law.

Advantages of obtaining a cryptocurrency license in Portugal

Optimal tax burden.
The autonomous region of Portugal – Madeira is favorable for legal entities with its 5% corporate tax, and 0% tax on dividend payments. For physical persons, there is no tax on income derived from cryptocurrencies and the need to declare them.

EU zone.
Stable economy, clear legislation, highly qualified personnel, and the ability to work with the European banking system.

Support from the state.
The opportunity to buy real estate, and pay for services and goods using cryptocurrencies.

Optimal conditions for opening a business.
For legal entities, there are no requirements for initial capital. A Portugal crypto license is required for certain types of activities.

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Requirements for obtaining a Crypto License in Portugal

To successfully pass the Central Bank’s inspection and obtain a Cryptocurrency Exchange License in Portugal, certain conditions must be met:

Official registration of the business.
It is obligatory to register a legal entity in Portugal (or in autonomous regions), to have a local office, to which the initial capital is not prescribed (usually contribute EUR 1000). There are no citizenship requirements for shareholders, but there is a mandatory proof of reputation (certificate of absence of criminal record, participation in fraudulent schemes), and one of the general managers must be a resident. Also, a business plan is provided, where the work with risks must be described.

Interaction with the Central Bank. The Central Bank acts as a regulator and controller, and all applications from organizations planning to do business in the financial sphere, as well as the issuance of permits go through it.

Compliance with AML/KYC requirements.
AML manager (resident) must be appointed, director/manager must be trained on AML/KYC procedures. Financial institutions are required to identify users, monitor transactions for fraud, and provide secure storage of data, and organization documents.

Financial responsibilities.
Maintaining accounting records, filing a declaration, and opening a corporate account is mandatory.

Procedure for obtaining registration of a crypto license in Portugal

The process of obtaining a crypto license takes place in several steps:

  • Stage 1

Selecting a crypto activity

It is necessary for a business to clearly define what kind of activity it will provide in the future.

  • Stage 2

Formation of a package of documents for the company

First, the name of the company is selected. The identity and residence documents of all managers and founders are collected, as well as proof of their professional activities, the business model of the enterprise is described. The company has to choose the premises for the office.

  • Stage 3

Opening of the company

Online registration is allowed in Portugal. After name verification in the Registry of Company, the company prepares all documents (Articles of Association, agreements, protocols), makes the authorized capital, and submits them to the Registrar for verification. The state duty is paid – EUR 360, registration lasts about 2 days. As a result, the company receives a certificate with a registration number.

  • Stage 4

Bank account

There are more than 140 banks in this jurisdiction, and the process of opening an account can take up to one month. Financial companies must confirm the source of funds, open the data on the founders, and describe the purposes and activities.

  • Stage 5

Applying to the Central Bank

The license for crypto activity is issued by the Bank of Portugal, the state fee for Portugal crypto license online is EUR 475. The regulator particularly scrutinizes businesses for compliance with a set of regulations and requirements for the prevention of money laundering and terrorist financing (AML/CFT).

  • Stage 6

Decision from the Central Bank

In terms of time, the procedure of obtaining a crypto license can take up to 6 months.

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Establishing a cryptocurrency company in Portugal

The process of establishing a company consists of:

  • Stage 1

Defining the business model

The company clearly defines for itself the further type of activity, based on which there is a comprehensive business plan with the details of all activities (description: technical component, implementation and filing of accounting reports, fulfillment of legal criteria).

  • Stage 2

Selection of a unique name

The repetition of company names is prohibited on the territory of the state, you can check the uniqueness of the name of the company with the help of the Registry of Company.

  • Stage 3

Collection of documents

The following documents are submitted to the state body: data on all managers, and founders, as well as information on their place of residence, business reputation, and detailed CV, (one of the top managers must be a resident), preparation of founding documents (charter, agreement), documents for the local office. There are no requirements for the initial capital, usually EUR 1000.

  • Stage 4

Establishment of the company

If the company is established in Portugal, the corporate income tax will be 14.7%, if in the free economic zone of Madeira (IBCM), then the income tax is 5%.

  • Stage 5

Register with the Tax Authority

The tax administration of this country adheres to EU legislation, so cryptocurrency companies do not pay VAT. The company should obtain a NIPC (Número de Identificação de Pessoa Coletiva) number for its operations.

  • Stage 6

Corporate Account

For banks, it is important that the account opening package also includes:

  • Extract from the state register with the company’s registration number
  • Extract from the register of beneficiaries
  • Documents on the company and managers, shareholders
  • Contact information (phone number, e-mail, website).
  • Stage 7

Submission of documents for obtaining a license

The Central Bank is particularly focused on AML procedures and requires:

  • Identify clients of individuals and legal entities, create a client profile
  • Monitor, and store data on user transactions
  • Refuse to conduct transactions if there is suspicion of fraud, money laundering
  • Conduct staff training permanently

The manager of the company must be a resident. Portugal’s crypto license cost is EUR 475 when applying to the Central Bank.

Regulation of Cryptocurrencies in Portugal

The Central Bank of Portugal (Banco de Portugal) decides whether a legal entity meets all Portugal crypto license requirements. Since 2020, its functions, in addition to protecting the rights of financial market clients, also included supervision of crypto market participants and their compliance with regulations on the prevention of money laundering and terrorist financing.
No separate legislation has been adopted for cryptocurrencies in this jurisdiction; activities in the field of crypto assets are coordinated:

Risks of cryptocurrency licensing business in Portugal

As of September 1, 2020, the functions of the regulator of crypto activities began to be carried out by the country’s Central Bank, and issued a warning that operations in the crypto market require special caution and careful analysis.

The Bank of Portugal, based on regulatory practices in the EU, points out the potential risks in transactions with virtual currencies:

  • Portugal has not recognized virtual currencies as legal tender, their value is market-regulated
  • There is no law to protect consumers in transactions
  • There is no fund to cover losses from cryptocurrency transactions, from their depreciation, users take all risks on themselves
  • Cryptocurrencies are often used for money laundering, illegal enrichment, fraud
  • When trading/exchanging virtual currencies, if users are likely to lose all crypto-assets

Taxation in Portugal

This is one of the EU countries where low rates are introduced for crypto activities. The Portuguese Tax Authority (Autoridade Tributária) has clarified the taxation of cryptocurrencies in Processo nº14910 and Processo nº 5717.
Tax regime:

  • For individuals – 0% tax on capital gains from cryptocurrency transactions if it is a non-professional activity.
  • No VAT (EU Court of Justice case 264/14, Regulation of 2019 of the Portuguese Tax Authority)
  • Capital gains tax 28% up to 35%
  • Corporate tax is 21%, in Madeira -5%

FAQ about cryptocurrency license in Portugal

Is it legal to trade cryptocurrencies in Portugal?

Yes, the registration and control of cryptocurrency companies is carried out by the Central Bank.

How to get a cryptocurrency license in Portugal?

To obtain a license, you need to apply to the Bank of Portugal with an application and a full package of required documents.

How much does it cost to get a cryptocurrency license in Portugal?

The cost of the state duty for the application is EUR 475, but you should take into account several other factors that may increase the cost: the cost of company registration, registration of a corporate account, and apostilization of documents.

Who needs to obtain a cryptocurrency license in Portugal?

Legal entities that intend to conduct crypto-activities to exchange cryptocurrencies, including fiat, make payments, and offer custody services need to be licensed.

How long does it take to obtain a cryptocurrency license in Portugal?

The process of reviewing all documents by the Regulator takes up to 6 months.

Can foreign companies apply for a cryptocurrency license in Portugal?

The license is issued to legal companies resident in Portugal.

Can a cryptocurrency license in Portugal be revoked?

Yes, upon violation of AML legislation and procedures.

Is Portugal a cryptocurrency tax haven?

Here are some of the lowest taxes for cryptocurrency companies, personal income is not taxed.

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